Why else would we even subscribe to a penny stock newsletter? When your average person on the street hears the word “penny stock” they automatically become disinterested. When a real investor hears the word “penny stock” they automatically see dollar signs.

Not every penny stock is a winner and not every penny stock offers an opportunity. The trick is to throw together a penny stock list of companies that have potential and then start narrowing down your results.

There is a lot of money to be made investing in penny stocks. When was the last time that you looked on your screen and saw that Microsoft, inc (MSFT) or even Google (GOOG) has doubled? It just doesn’t happen with blue chip companies like it does with penny stocks.

MOPN 30 Day Chart

MOP Environmental Solutions, Inc. (MOPN) was virtually an unknown penny stock last week. Friday after the close the company announced that they had received a purchase order from British Petroleum (BP) in order to assist in the clean-up process in the Gulf of Mexico. The stock is up 267% today so far. It jumped from .08 to .35 earlier today after opening at .16. Not bad for a days work.

This is a common occurrence in the world of penny stocks. I see it happen everyday. The key is to find the company before it happens. This is what we do here at pennystockexplosion.com

Still not convinced you can make money with small cap stocks?

What I am about to tell you might shock you.

If you are not familiar with the Russell 2000 index, you should Google it. The Russell 2000 tracks small cap stocks. Over the past two years we have seen the low point in the markets occur during February and March of 2009. I took a look at the Russell 2000, the S&P 500 and the Dow and compared their performance to date. The Russell outperformed the Dow by a massive 71% and the S&P 500 by close to 40%.

I am sure that now you are a believer in penny stocks. We will have some more relevant information coming soon.

The is one thing that you can count on almost every time in the United States. It’s when the government tries to regulate or in this case over-regulate an industry, somebody smarter than them will figure a way around it.

The intention of the FinReg bill, which was signed into law last month was to curb speculation among banks. Once the bill was passed, most felt that it was just a matter of time before somebody found a loophole. Well yesterday, Goldman Sachs (NYSE: GS) figured it out.

CNBC’s Kate Kelly broke a story that Goldman Sachs could potentially spin off its proprietary trading unit this month. Shares of GS rallied sharply and mildly lifted the major indexes. The details of the move are still not etched in stone. However, the intention is obviously to separate it’s highly profitable prop trading unit from the bank. This will basically allow traders to exceed the 3% limit on investing tier one capital.

Now how does this impact investors? Do penny stocks ever make money It’s pretty obvious that most people would like to invest in a GS unit that is incredibly profitable, and is filled with some of the top minds in the industry. However, the details of the deal are still unknown. If Goldman’s move proves to be successful, other banks will surely follow.

On the other hand, the move will probably only affect the OTCBB with positive sentiment. As we have mentioned many times in other blogs, penny stocks are impacted positively when the large caps in favor. The GS spin off could potentially spur a rally in the financials, which would surely lift major market averages. Consequently, some of those profits often find themselves trickling down into micro caps.

However, the OTCBB is an exchange that is skewed towards mining stocks and biotech. Not financial stocks. Many mining penny stocks are linked to larger NYSE companies with their projects. Many of us have read about these relationships in various PR’s and penny stock newsletters. It is almost unheard of though, to see an OTCBB financial stock releasing news on some contract with a Morgan Stanley (NYSE: MS) or a JP Morgan (NYSE: JPM). With that being said, the prospect for hot penny stocks to develop off of the GS spinoff is slim. But as usual, be ready just in case.

I am writing this piece on the once hot penny stock sponge tech Delivery Systems (SPNGQ: PK) for one reason, to try to get you to not only think rationally when buying equities but to also think outside of the box. Spongetech claimed to be a fast growing retailer of sponges. Their target market was kids, cats, and dogs. They had a brand name and Walgreen as a customer. Plus, it seemed like you saw the company almost every time you watched a sporting event. On the surface, this doesn’t seem too bad. Or does it?

Now, what did Spongetech longs miss in this play? We’ll it’s easy to say now, but at the time, between their product, and advertising campaigns, a case could be made for owning shares. I mean, even the New York Mets, Boston Red Sox, and New York Yankees advertised for Spongetech (All three are still owed money by Spongetech ).

Is it easy to spot the next Spongetech? No. However, most penny stocks scams that implode often have some the common symptoms. And I’ll touch on a few. The first being, do your homework and don’t dismiss negative information and articles just because you own the stock in question. And by no means am I saying to take some guys word on the Yahoo Finance message board as gospel. The sources have to be somewhat credible. In the Spongetech fiasco, The New York Post happened to be the source that hammered Spongetech. And guess what? The Post, along with a few short sellers with online followings happened to be right. So do your reading, time is your only expense.

Now there is a difference between investing and trading. Savvy traders can make money shorting the strongest stocks and buying the weakest. It doesn’t matter if it’s IBM or a penny stock, but most retail investors simply can’t. This is why if you have a time frame for a day, you should never own a stock that is accused of fraud, by even a somewhat credible source. The downside is just too big, and when a stock goes to zero, it wipes out other hard earned gains.

Another way to spot a red flag is to simply compare its sales to its market cap. If a company has a cure for AIDS or cancer and trades at 100 or 200 times sales that are one thing. But a company that sells sponges infused with soap is another. The lesson here is to just compare and contrast the penny stock you own to a larger more established company and just do some quick math. I realize some hot penny stocks trade at high price to sales ratios and often have high PE’s if they have any at all. But, after you check your stock versus a competitor, don’t be afraid to take a profit or even a loss, if the numbers are obviously far out of whack.

Lastly, and I’ll be brief with this one. Take a peek at the company’s financials, and if you can’t understand them, try and find somebody who can. That source might be a friend or an internet source. Once again, don’t take their interpretation as gospel, but factor it into your decision-making process. Especially if you are a novice. However, if these financials, smell fishy, sell the stock first and ask questions later. Can this way of thinking take some of your upsides off the table? Absolutely. But can it also save your account from getting blown up? The answer is yes. Remember there are plenty of trading opportunities out there. As a matter of fact, we just issued two consecutive profitable penny stock alerts to our subscribers in the last two weeks. A big component of making money in the stock market is sticking around long enough to make it.

In past, we have written blogs on zombie stocks like Lehman Brothers (LEHMQ.PK) and Washington Mutual (WAMUQ.PK). Most zombie stocks eventually go to zero because they are usually close to or in bankruptcy.

However, the low priced stocks are usually some of the most active and liquid names in the entire stock market. Today though, it seems Fannie Mae (FNMA.OB) seems to have taken the zombie throne. The volume of shares of Fannie Mae has been insane. The average volume for the stock for the last three months is just under 30 million.

Despite many experts and analysts predicting that Fannie Mae will eventually go to zero, some short term traders have done well in the shares. Even though Fannie Mae has a household name, most of the volume comes from retail investors. There may some hedge funds that trade the stock, but institutions usually stay away from situations like FNMA.

The mortgage and housings markets are improving, but are still shaky. The government’s huge stake in both Fannie Mae and Freddie Mac are evidence of this. But common sense tells me that there is a need for a company like Fannie Mae to exist. I think this rationale draws some people to the stock. The holders are basically playing a lottery ticket and hoping for some changes out of Washington. Some sort of proposal could be in Congress by January.

In the meantime, there will be several days to buy and sell these hot penny stocks. The strong volume should continue into the later part of the year, in anticipation of a final decision. Seasoned penny stock flippers should benefit play volume surges and technicals, but others will surely be big losers.

We mention risk often in our blogs and how to deal with it. If you decide to day trade FNMA remember to take profits and implement a risk/reward ratio into your trade. Remember that there are people who make a handsome living trading liquid low priced penny stocks.

If you are a longer term investor and you decide to take a flier on Fannie Mae, only invest what you can afford to lose. The best mentality is to act as if the investment is a lottery ticket. Because that’s what it is. Just remember, that trading zombie stocks are like playing musical chairs. Just be sure to be sitting in one when the music stops.

One thing that has been obvious this year, is that people are drinking coffee at alarming rates. Even consumption in markets like Japan is on the rise. More importantly, though, investors have been bought coffee related stocks aggressively. All the way from big names like Starbucks (SBUX: NASDAQ) and Green Mountain (GMCR: NASDAQ) down to super aggressive plays like “>Jammin Java (“>JAMN: OB).

In this entry, I’d like to point out a pink sheets penny stock that seems to have garnered some interest recently. The name of the company is Javulation Coffee Company (JCOF: PK). Shares are currently down 5%, but the stock has more than tripled in the last 10 sessions on reasonably strong dollar volume. Like its industry peer JAMN once did, Javulation, JCOF has taken advantage of bullish sentiment in the coffee space and a stock promotion. JCOF is a roaster and distributor of gourmet and nutritional coffees. The company is based in Ft. Lauderdale, Florida.

Although JCOF trades on the pink sheets which are the lesser of the two penny stock exchanges, the company seems to be fundamentally superior to JAMN. According to Yahoo Finance, JCOF has revenues in excess of $4 million. These revenues have also grown substantially on a percentage basis. The company has credited cruise line sales as a catalyst for this gain.

Is JCOF a Buy?

Now is JCOF a buy at these levels? I am not quite sure. We alerted our subscribers to JAMN early in its run, and the stock traded significantly higher, but due to our short term approach, we still left some profits on the table as shares continued to rise. However, weeks later, shares of JAMN experienced a substantial decline, which is an example of why many penny stocks can’t be held for too long. Shares of JCOF have already made a massive run but still could attract formerly profitable JAMN longs if the shares pull back.

Please remember, despite the fact that JCOF seems relatively solvent, these types of penny stocks are often used best as trading vehicles. Especially after the hype starts to fade. As mentioned above, here at PSE, we try to take a shorter term approach to penny stock trading, often only staying in a stock for 1-3 days. So if you already booked a profit in JCOF, it might be best to move on. If you haven’t traded the name yet, add JCOF to your penny stock list and keep it on your watch list.

Check back for more penny stock news, IPO updates, and stock market research.

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American Superconductor (AMSC:NASDAQ) This green energy play announced today that they will miss their revenue estimate and their delay earnings announcement. This is usually not good news, but AMSC may be so beaten up that it doesn’t matter. However, considering AMSC’s massive short interest, the sidelines might be best on this one.

Multicell Techs (MCET:OB) This hot penny stock more than tripled today on big volume. Add MCET to your list of stocks just in case of follow through.

LinkedIn (LNKD:NASDAQ) There is plenty of talk about the option pricing of LNKD and the availability of borrowing for short sales. Shares of LNKD were beaten up today but could be a swing trade bounce candidate for experienced traders at some point.

Lithium Exploration Group (LEXG:OB) The volume has been drying up in LEXG in the last couple of weeks, but that doesn’t necessarily mean the selling is done. Regardless of your bias, add LEXG to your penny stock list.

Rare Element Resources (REE:AMEX)Rare earth stocks did OK today and seem to be coming back in favor. REE is a small cap and is more than 5 point off it’s 52 weeks high. This is just another name that could rip if the group sentiment remains favorable.

Dell Computer (DELL:NASDAQ)This once hot stock has become almost a value trap for some traders. However, DELL is currently the top trending stock on Yahoo Market Pulse at the time of this entry.

Research in Motion (RIMM:NASDAQ) It’s become pretty hard to say anything positive about RIMM lately. It just seems like committed longs are pinning their hopes on a takeover. The technicals look weak at best.

Nokia (NOK:NYSE) We had NOK on the mornings stock to watch list and noted it’s weakness. Shares of NOK didn’t close on the lows of the day but they were in the neighborhood. There are investors that love to buy these single digit share price, NYSE names that are fallen, angels. I am just not one of them.

Legend Oil and Gas (LOGL:OB)We highlighted LOGL a little while back and the shares have been forming a decent base and are near year highs. Keep an eye on this one just in case of a breakout.

IShares Silver Trust (SLV:NYSE) Just when people thought the run was over this Silver ETF has quietly worked itself higher. Are all of the weak hands out the trade? Only time will tell.

Check back for more penny stock news, IPO updates, and stock market research.

Yesterday U.S. markets traded down and world markets followed suit this morning. Both traders and investors are awaiting Fed Chairman Ben Bernanke’s speech from Jackson Hole. This will surely be the catalyst for Friday’s trading and tape action should be volatile

Now there are different ways to approach buying before the Fed Chairman speaks. It is probably safe to say that Mr. Bernanke has usually been clearer with his words than his predecessor Alan Greenspan. But the problem remains trying to anticipate what their message is. Experience tells me that is a losing battle unless you have a crystal ball. Trying to go either long or short before such an important speech tends not to work because of the choppiness of the market. Many traders get stopped out and then have to watch their former position trade to their initial profit target. Without them in it.

Now you have read recent blogs here about takeovers and market bottoms. However, those market trends apply to investors, not traders. For instance, if you had an urge to buy a penny stock like China BTC Pharmacy (OTCBB: CNBI.OB) in the 4 dollar range as a long term hold, it may or may not be wise. However, if you had a 2-3 year window and a price target of 10, a fluctuation of 40 or 50 cents really isn’t an issue. On the other hand, if you were buying this micro-cap name as a momentum play for a short term pop, you often are gambling on Bernanke and market direction. Yes, sometimes do trade in sympathy with the broader markets.

The age old question of trading before Bernanke especially applies to large cap names, which are obviously more sensitive to the Fed, than OTCBB stocks. But the same philosophy applies. If you are comfortable buying a name like Bank of America (NYSE: BAC) and have a long term investment philosophy, by all means, buy the stock. But if you are a short term trader, you must remember that many good ideas turn into losses when the Fed is involved. This is why it is often best, to put the trading ideas on hold. Being impatient in the market is often a recipe for disaster.

Here at PSE, we try to issue pieces that give some guidance to aggressive traders, and CROWN VENTURES INC. NEW (PINK: CRWV) has popped up on our radar screen. By no means are we recommending a purchase of CRWV, because at this point the shares should just be viewed as a trading vehicle.At the time of this entry on Monday, CRWV is up about 18% on fairly heavy volume, which has eclipsed 43 million. At this point some could say the gains in CRWV are simply the product of penny stock gold players jumping in (Even though gold is off sharply today), others may credit the upward move to a strong stock promotion, but more importantly, there is a strong vibe in the penny stock commumity that a potential short squeeze might be underway with CRWV.It doesn’t take a genius to figure out that naked shorts are involved in many rising penny stocks, and these same prop traders and market makers are often right when they catch an overbought penny stock at the tail end of it’s move.Now last week CRWV announced that it’s properties have potentially $3 Billion of gold on them. Is that a stretch ? Probably. But does that mean that market makers might be caught short ? Well that remains to be seen.

CRWV Showing Strong Signs

Some of you may remember Cascadia Investments (CDIV.PK), which was a gaming play that basically had no revenues and was under major scrutiny from the press. However, that didn’t stop shorts from getting absolutely killed after they were bought in to CDIV at higher prices.At this point, the perception is that the Reg Sho list on CRWW is growing and was over 16 million shares short on Friday. Does perception become reality ? Does a squeeze occur ? That is yet to be seen, but regardless of your bias, add CRWV to your penny stock list.

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Eline Entertainment Group (EEGI.PK)finished the day as the 10th highest percentage mover of all pink sheets penny stocks. However, all 9 stocks that finished above EEGI, had inconsequential volume in a best case scenario.This leads us to believe that EEGI could be added to a few penny stock lists in the near future. EEGI finished Monday up 350%, and spectacular one day returns like today’s often draw buyers into the pre-market and cause gap up scenarios. Are we alerting our subscribers to partake in this trade ? No, not at this time, it’s still too early to tell.EEGI is a two part company, consisting of Let the Good Times Roll and Vu365. Let the Good Times Roll is a luxury transportation division and Vu365 is video game designing company based in China.Now you have to ask yourself one question. Are livery and video games a good match for a proper business model ? Probably not. However, this doesn’t mean EEGI can’t turn into a quality trading vehicle. In other words it’s no secret that today’s buyers were probably not buying EEGI today because of the management team, the product or the underlying fundamentals.

EEGI Expecting Cash Infusion

My sense tells me that today’s move in EEGI was pre-promotion related. Mainly because there has been little volume until today. There also have been no current press releases. The last PR was on April 18,2011, which let shareholders know that Let the Good Times Roll obtained a permit to operate at Tampa’s International Airport. Now that isn’t fluff, I don’t know what is. It doesn’t exactly take an act of Congress for a limo company to operate at airports.There isn’t much to say about the fundamentals either. There hasn’t been an SEC filing since December 6, 2010. Now maybe it could be true that EEGI is getting a cash infusion. That could be today’s cause for the upside explosion. But only time will tell whether today’s move was just a one day blip or a precursor to a promotion.For now, stay tuned for EEGI updates and add this name to your penny stock list.

Clearwire Corporation (CLWR:NASDAQ) has been an enigma to speculative investors for some time. The Kirkland, Washington based company that specializes in 4G networking had a volatile, negative past up until recently,Clearwire Corporation has been trading as if it were a broken penny stock.But positive events happen, and in mid-August we saw some sizable insider buys inClearwire Corporation. Shares of Clearwire Corporation CLWR consequently rallied from the $1.60ish range to $3.42 in a little more than a week. Now remember, Clearwire Corporation has frequently sucked in longs on mini rallies since it was trading in the teens.So why is Clearwire Corporation any different now ? While this recent move might be a bull trap, Sprint (S:NYSE) may have a different story to tell. As many of our readers know, we like to highlight potential sympathy plays at PSE, and Clearwire Corporation often moves based on the performance of Sprint.Now according to WSJ reports, Sprint is will up and running with the iPhone this fall. At the time of this entry, shares of Sprint are basically flat. So was the iPhone premium already factored in to both Sprint and the recent move in Clearwire ?

Clearwire Corporation Risky Venture

On a technical basis Clearwire Corporation has been in a downtrend for sometime and currently looks extended, with a downside gap to fill in the $2.20 range. There are also multiple layers of resistance to break at higher prices. So unless you feel Clearwire Corporation is an acquisition candidate, it might be wise just to watch how the Sprint/Apple Computer story plays out.Only time will tell, but the insider buying might a bigger catalyst forClearwire Corporation than the actual iPhone/Sprint event. Remember that a buyout of CLWR by Sprint has been rumored for some time. However, Clearwire Corporation is a heavily shorted, debt ridden company that has been a dog for sometime.Regardless of your bias, add Clearwire CorporationCLWR to your list of stocks on a just in case basis.